The Housing that Comes with a Bonus: More Housing
California has advanced several housing reforms over the past decade to tackle high costs, but one 1979 law—the Density Bonus Law—has become one of the most-used tools for homebuilders to get their housing approved by cities and counties. The Bonus Law lets builders exceed local zoning limits and build more homes than would otherwise be allowed, in exchange for including some permanently affordable homes.
The City of San Diego pioneered the law’s core formula, and two statewide amendments, in 2020 and 2023, made the trade profitable enough for builders elsewhere to use it.
In Win-Win Bonus: How Bonus Law Quietly Transformed California’s Housing Approvals, Circulate Planning & Policy CEO Colin Parent, with research and writing help from Jeremy Bloom and Aria Grossman, examined the effectiveness of this law and argues that properly calibrated financial incentives like density bonuses can lead to more housing approvals.
Key Takeaways
- Pays For Itself. California cities and counties approved 48,120 homes under Bonus Law in 2024 alone. In fact, 47 percent of all apartments approved in 2024 used Bonus Law.
- Affordable Housing Benefits. In 2024, 78 percent of subsidized-affordable apartments approved statewide used Bonus Law because it lets builders add more subsidy-eligible affordable homes.
- Less is More. Requiring a higher affordable set-aside, instead of the 15 percent used in Bonus Law, would likely have produced fewer affordable homes, because the deeper requirement doesn’t make financial sense for builders.
The author examines Annual Progress Report data that cities and counties filed with the state between 2018 and 2024. This dataset tracks approvals across thousands of multifamily homes. For certain streamlining laws, each approval is tagged with which law is used. This enables comparison against Senate Bills 35, 9, and 6, AB 2011, and a pre-2020 baseline. Annual Progress Report data is self-reported by cities, so it may contain errors, but it remains the best available data.
A few patterns emerge that explain the policy’s success:
Bonus Law wins by paying for itself. Amendments made to the law in 2020 (AB 2345) and 2023 (AB 1287) allowed even more bonus homes, which ultimately are worth more than the affordable ones cost. It now accounts for 47 percent of all homes approved in multifamily projects in 2024 and more homes than the other four tracked streamlining laws approve combined (SB 35, SB 9, SB 6, AB 2011). Between 2021 and 2023 alone, more than 25,000 homes across all Bonus Law projects used the extra density to exceed what zoning alone would have allowed, while another 19,000 needed no added density at all.
Even fully affordable builders opt in freely. 100 percent affordable housing developers even use the law because more total homes (still 100 percent affordable) increases subsidy eligibility and lets fixed costs like attorneys’ fees and land purchases spread across a bigger award. In 2024, 78 percent of all homes in fully affordable apartment projects approved statewide used Bonus Law.
Generosity must still be financially advantageous for builders. The law grants extra market-rate homes in exchange for setting aside affordable ones, and that trade only works if the bonus is worth more than the affordable units cost. AB 2345 raised the maximum bonus from 35 percent more homes (previously set at an 11 percent very-low-income set-aside) to 50 percent, for projects that set aside 15 percent of their units as very-low-income affordable homes. Advocates pushed for a deeper 17 percent set-aside instead, but cost analysis showed that at 17 percent, the same 50 percent bonus would leave builders no better off than the old 35 percent version, giving them no reason to accept the higher requirement.
One fix would further make it easier to use this tool and approve more homes. The Bonus Law is opt-in, and builders who invoke it supersede some of the city’s rules, so some developers with qualifying projects skip it for fear of retaliation. Applying the benefits automatically removes that ask and the risk.
While repairing broken local zoning rules remains imperative, expanding financial incentives like the bonus law could deliver thousands of homes annually.
Photo by Ant Armada